The RAD cap is increased — now what?

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Community TopographyBefore a robust crowd at the recent Best of the West in Affordable Housing Development and Finance conference sponsored by Ballard Spahr and CSG Advisors in San Francisco, the value and evolution of the U.S. Department of Housing and Urban Development (HUD) Rental Assistance Demonstration (RAD) program was a common point of discussion among panelists. Lydia Ely from the San Francisco Mayor’s Office of Housing and Community Development, Daniel Nackerman of the Housing Authority of the County of San Bernadino and Starla Warren of the Housing Authority of the County of Monterey offered a cross-cutting review of the types of RAD conversions that support deals of various sizes and rely on a mix of structures using private developers, housing authority expertise and/or collaborations with city agencies. Catalina Vielma, a branch chief on the RAD team within the HUD Office of Recapitalization, offered pointers about working with HUD and Terry Wellman of PNC Real Estate brought the lender and investor perspective to our RAD-focused panel.

Key insights arising from the discussion included:

  • HUD is working hard to build on lessons learned through the approval process and has issued a Welcome Guide for New Awardees: RAD 1st Component using insights learned from the focus groups HUD hosted earlier this year. The Welcome Guide provides further detail on certain points of the approval process that may not be readily apparent in the RAD Notice or in other places on the RAD Resource Desk;
  • Ely provided an overview of the RAD waiver HUD recently granted for San Francisco, a critical piece in providing clarity in the combination of properties approved for conversion under RAD and those approved for disposition by HUD under the traditional Section 18 approval process. The waiver allows the RAD tenant protections to be applied the “Applicable Alternative Tenanting Requirements” (allowing certain Section 8 waivers on the percentage of a housing authority’s budget authority that can be project-based and the percentage of units within a project that may receive project-based vouchers, along with additional resident protections) to all of the units within projects that contain RAD units;
  • It is key for the parties within a transaction, including HUD, to have a shared understanding of the “true” closing deadline for the deal;
  • HUD will be issuing a new notice this Spring covering the RAD process for all of the applicants added to the RAD queue above the initial 60,000 unit limit. However, the CHAP milestones will not begin to run for these applicants until the later of the date of the RAD award or the publication of the new notice. Those RAD awardees that received CHAPs under the 60,000 cap will continue to be governed by the existing RAD notice;
  • RAD is a preservation tool with perpetual use restrictions that survive foreclosure and resident protections carrying over to the converted projects.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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